Many people would like help with their finances in later years. Their adult children may want to help but don’t know how to bring up the subject of their parent’s finances, let alone move into a positive financial caregiver role. If you would like to be better informed about your parent’s finances so you can help them, keep reading. This article will help you navigate the waters of becoming a financial advocate for your aging parents.
Being a Financial Advocate for Aging Parents is Challenging
It is a lot of work to be a financial ally. Start now by learning some insights from academic research. It will help you be more prepared today or in the future if you need to be a financial advocate for your parent(s).
Attorney and longevity researcher Naomi Karp, from the University of Stanford, cites a variety of studies that provide some clues to the different ways this process can play out. People who develop dementia obviously need what she calls a financial advocate. This financial advocate may be the person’s trusted friend, family member (children, especially), lawyer or professional financial adviser.
But roughly a third of aging Americans who are experiencing natural cognitive decline are prone to making poor decisions about their money, she explained during a recent webinar sponsored by the federal Consumer Financial Protection Bureau (CFPB) where she used to work.
Financial acumen actually peaks well before retirement – at 53! – but wisdom makes up for some of that, she said. During one’s 70s and 80s, financial literacy declines, but unfortunately confidence about one’s abilities remains high. “That’s a risky situation,” Karp said.
What are the First Steps to Becoming a Financial Advocate?
- Get your own financial house in order. Make sure you have up-to-date financial knowledge and practices. Get comfortable talking about money with your spouse or partner. Talk with your children, too.
- Learn from your parents. Ask them for advice about what works for them and how they have made financial decisions over the years. Ask them the best ways for adults to talk about money without it ending with an argument. Then listen. Really listen!
- Talk about money with your parents in bits and pieces over time so that communicating about money is almost as comfortable as talking about the weather. How do they organize their financial records? What is working for you? Where do they store their records and where would they suggest you store yours? How do they decide where to bank? What would they recommend to you? Who are their trusted advisors? Would they feel comfortable introducing them to you?
- When the time is right (but don’t wait too long) ask them what they would like you to know about their finances. Is there a time when they think you might be helpful to them? When might that be?
As you think more about this topic and to help make communications with aging parents more comfortable and productive, take a look at a free website funded by AARP and the Society of Actuaries: the Thinking Ahead Roadmap. The URL is thinkingaheadroadmap.org Six steps are listed on the website with great tips, tools and information to help guide the process.
What if you don’t start the process of talking about being a financial advocate soon enough when your parents were doing okay managing?
“Unfortunately, that’s normal,” says MPower Co’s Director of Education Dr. Thia Crawford. “The first place that cognitive decline tends to show up is in financial management.” Here are some red flags:
- Paying the same bill multiple times;
- Not paying bills when the person has always paid promptly in the past;
- Giving away large amounts of money;
- Having lots of cash stashed around the house – some of which may never be found;
- Overdrawing the checking account and ignoring bank communications;
- Buying things a person already has, resulting in situations such as having four toasters and six sets of screwdrivers; and/or,
- Significant amounts of unopened mail scattered throughout the house and vehicle.
Remember, it is “if” not “when” cognitive decline happens. It is important to plan ahead and make “what if” decisions now before cognitive decline occurs. AARP reminds us that capacity is not an all-or-nothing situation. Our capacity fluctuates over time and from task to task. Remember financial capacity is one of the first abilities to decline as cognitive impairment may be happening. Because decline can be slow and incremental, people and their families may not realize problems are developing.
By having discussions early and often, you will know what your parents expectations are and how you can best be a financial advocate for them.
Free Resource – Secrets of an Effective and Thrifty Estate Plan
If you are thinking about how you can be a financial advocate for your parents, you may also be interested in estate planning. Estate planning is an important piece of a financial puzzle. We have a free resource that can help you understand important components of an estate plan. If you are ready for 10 Tips on how to put together an effective, yet thrifty estate plan, click on this link to get our free download on estate planning. You’ll be on your way to putting together your effective estate plan!